Late yesterday we learned about the latest wrist slap coming from the PCAOB for an audit firm. Deloitte was fined $2 million for allowing a suspended partner, Christopher Anderson, "to become an 'associated person' of Deloitte during the period of the suspension."

I could go on but it's quite simple: there's nothing to like about this disciplinary order. If you give one rat crap about the state of the auditing profession and the PCAOB's role as an effective regulator of said profession, then this is just more of the same stuff that drives you berzerk.

To understand how, it's important to understand the details and when you do understand those details, It's pretty easy to conclude that Deloitte was phoning in their oversight of this situation. here are some key paragraphs:

8. In anticipation of a potential settlement between Anderson and the Board, Deloitte began the process of removing Anderson from its Chicago audit practice and transferring him to the Audit and Assurance Services ("A&AS") Group within the firm's National Office. The A&AS Group was responsible for handling consultations with all audit engagement teams, including issuer engagement teams, and also was responsible for developing and maintaining all of Deloitte's audit policies and guidance, including for issuer audits.

Okay, kinda like when Jimmy McNulty was put on harbor patrol, right? Seems like a decent way to get some distance from actual auditing for this guy.

9. At that time, in spring 2008, the leader of the A&AS Group in the National Office ("Group Leader"), with input from Anderson, drafted a description of Anderson's proposed job duties ("Anderson position description") for a three to five year assignment in the A&AS Group. The then-deputy managing partner of Deloitte's Audit and Enterprise Risk Services professional practice department reviewed the position description.

10. Based, in part, on the position description drafted and approved by the Group Leader, Deloitte's Leadership Oversight Committee ("LOC") approved transferring Anderson to the A&AS Group of the National Office. The LOC, among other things, had primary responsibility on behalf of Deloitte for determining and directing appropriate remedial actions to be taken with respect to Deloitte partners and employees subject to regulatory action. Anderson officially transferred into the National Office in July 2008 and remained there during the suspension year.

In other words, the firm made up a job for Anderson in A&AS Group with his help. That seems, I don't know, weird? Inappropriate, maybe? Flagrant? And only then was the "position description" approved by a Leadership Oversight Committee. It seems a little odd that the person in trouble would be allowed to have input in what their new, made-up timeout job would consist of, but maybe that's how these things work. Again, I don't know.

Regardless, after all this, somehow, some way, people got confused:

The Group Leader and Anderson believed that, consistent with the limitations of the position description, Anderson would have contact with issuer engagement teams, and might provide certain audit advice of a general nature to issuer audit engagement teams. Anderson and the Group Leader did not inform the LOC of their belief, but the Group Leader later confirmed to the LOC that Anderson was "not doing any consultations." No one on the LOC advised Anderson or the Group Leader that Anderson was not permitted to provide advice of a general nature.

Okay, I'm just spitballin' here, but wouldn't it be prudent to not allow this Anderson fella within the breathing space of any issuer engagement teams? Just so he doesn't somehow wander into a gray compliance area? And if you're part of this LOC, wouldn't there be a conversation at some point with this guy where you say, "See this list of activities? Don't do any of them." And at the bottom of that list it would say, "Don't give advice of a general nature." The guy in trouble would nod and say, "Got it."

Nope. Didn't happen.

But because compliance is a tricky game, even an auditing firm of substantial means like Deloitte may consult their regulator on how best to navigate these waters. And yes, they did have some issues they wanted guidance on:

Prior to the issuance of the Anderson Order and the commencement of the suspension year, Deloitte sought and received guidance from the Board's staff concerning whether Anderson could "continue as a partner of the firm and [continue] to be compensated as such" pursuant to the compensation prong of the definition of "associated person," and at Deloitte's suggestion Anderson resigned from the Deloitte partnership and became a Director, a salaried position.

Alright, so Deloitte wanted to find a way to allow this partner to keep getting paid like a partner without technically being a partner. Even guys who violate auditor rules have gotta eat, right? What about ensuring that this guy's new obscure job description and his day-to-day activities were kosher?

In seeking guidance from the Board's staff, Deloitte did not seek guidance about Anderson's intended role in Deloitte's National Office, and, during the suspension year, did not inform Board staff about Anderson's actual activities in that role.

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